Thursday, December 23, 2010

What can we do about Britain's tax cheating culture?

We have received a number of emails from supporters of the UK UnCut movement asking what can be done to curtail tax cheating in Britain. We are happy to contribute the following ideas to the melting pot.

Britain has a particular problem with tax cheating. London lies at the centre of a global tax haven empire and tax cheating has become the norm at boardroom level and among rich people. It is not helpful that so many politicians are themselves users of tax havens. This has meant that despite years of promises of action, ordinary people in Britain have suffered a generally deteriorating situation as the business community has become more aggressive in its tax avoidance and British banks have become more devious in supporting tax cheats.

But that doesn't prevent ordinary people from pushing ideas for changes: not a single measure, but several measures that will cumulatively roll back the culture of tax cheating that is robbing us of our public services and contributing to Britain's extraordinary inequality.

The first measure we would mention is a General Anti-Avoidance Principle, which would clearly signal, above all to the courts, that avoidance, while legal, is cheating and not acceptable. This will tip the balance away from the whiners who moan that the UK UnCut protesters don't understand the difference between evasion and avoidance. The South African finance minister recently said that we have allowed avoidance to become too respectable: this is a lesson Britain's tax cheating community needs to learn.

Second, TJN is the main mover behind a global campaign for an international financial standard on country-by-country reporting. British businesses are trying to water this standard down to a voluntary rather than mandatory standard, which will make the standard meaningless. The UK government should commit itself to supporting a mandatory standard.

Third, we want to see the European Union's savings tax directive (STD) strengthened to, among other things, include offshore trusts: trusts are a favourite tool of the tax cheating industry. Behind the scenes British officials are blocking moves in this direction. A strengthened STD would provide the effective model for tackling tax evasion.

Fourth, Britain's non-domicile rule is an appalling example of Britain's cynical support for tax havenry. It has attracted many dubious characters to these shores, and their contribution to the real economy is zilch (and might possibly be destructive since these people typically invest in property and similar rentier investments which inflate prices without adding value). The non-dom rule should be abolished: period.

Sixth, Britain should require all of its offshore secrecy jurisdictions to place offshore company ownership information on public record, and no tricksy use of nominee directors and shareholders - we want the real identity of the warm-blooded person who ultimately owns the company. Ditto for disclosure of who benefits from offshore trusts.

Eighth, the British government should put a halt to the British Channel Island 'fulfilment industry', a pernicious example of how special tax treatments distort markets, reduce consumer choice, and lead to economic idiocies. We cannot understand why this little bit of trickery, which loses British taxpayers hundreds of millions of pounds every year, has been allowed to persist. But a nagging doubt at the back of our minds suggests that big business funding of political parties might be at least part of the reason.

Killing the tax cheating culture in Britain's boardrooms will not be achieved with a single well-aimed blow: it will take a number of carefully targeted slices. Cumulatively, the steps outlined above will be a major step in the right direction. It needs to go further, however.

Sadly, there is little evidence of any political will within the Conservative-led coalition government to do anything other than window-dressing: hence the need for ordinary people to take to the streets and target the most egregious offenders.

But be aware, too, that we will be announcing something else, very big, within the next two weeks. Watch this space.

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About Me

The Tax Justice Network (TJN) is an international, non-aligned network of researchers and activists with a shared concern about the harmful impacts of tax avoidance, tax competition and tax havens.
www.taxjustice.net